Symantec Turnaround Remains in the Offing

In the first quarterly report since ousting its CEO, Symantec posted 7 percent decline in earnings and issued a forecast for sluggish growth. Positive signs exist, but recovery is still a long-term proposition.

Symantec issued a mixed quarterly earnings report last week, as revenues declined, profits increased and the short-term forecast was for much of the same. The underlying conclusion: recovery and turnaround, despite the issuance of a new strategy, is a long ways off.

The world’s largest security software company posted $1.6 billion in revenue for its fourth quarter (January through March), down 7 percent over the prior year’s period. Overall annual revenue fell 3 percent to $6.7 billion, as sales of antivirus software continue to struggle and backup product sales remain under pressure.

Revenues declined, but annual profits were up 19 percent to $898 million, compared to $755 million for fiscal year 2013. Most of the profit improvement came from cost cutting and operational efficiencies initiated under former CEO Steve Bennett.

This is the first earnings report issued since Bennett was ousted in March. The numbers aren’t great, but they do show signs of improvement. Symantec is pivoting toward a new strategy that focuses less on antivirus and more on treat detection and containment. And it’s seeing demand for security products increase, giving it an optimistic forecast for the next quarter that exceeds analyst expectations. However, real revenue will still come in below 2013 figures.

“Our fourth quarter results, led by better performance from our sales teams and cost reductions, demonstrate the underlying health of our business,” Symantec interim CEO Michael Brown said in a statement. “In the new leadership team’s first 40 days, we’ve taken important steps to accelerate the pace of our transformation. There are substantial opportunities for us to improve our growth profile, maximize profitability and create value, and I’m confident we have the right team and plans in place to achieve our objectives.”

While Symantec is showing signs of recovery, if not stabilization, it faces myriad challenges ahead. The company gave no update on the search for a permanent CEO, only that it’s retained a search firm. And the security and partner community aren’t sold on the new strategy of advanced threat detection, as it’s a space Symantec has little experience and competitors such as FireEye and Palo Alto Networks are already greatly ahead.

Perhaps the most troubling aspect of Symantec’s efforts to recover from two-years of lackluster performance is the recently proclamation by one of its executives that antivirus is no longer a moneymaker and is an ineffective technology. While such notions are not original, Symantec may have prematurely devalued the primary source of its sales and revenue.

Symantec isn’t waiting for new products to stimulate its channel into higher performance. Last week, channel chief John Eldh unveiled a series of initiatives, including technology competencies and profitability enhancements, designed to influence and foster higher channel selling activity.